Swedish
crown slips on surprise rate cut, U.S. payrolls eyed
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[July 02, 2015]
By Jemima Kelly
LONDON (Reuters) - The Swedish crown sank 1
percent on Thursday after the central bank in Stockholm surprised
markets by cutting interest rates and saying it would pump more money
into the economy, citing risks from Greece.
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With investors gearing up for a flurry of U.S. data, the dollar hit
a three-week high against a basket of major currencies at 96.406
ahead of nonfarm payrolls numbers, which could firm up expectations
of a Federal Reserve interest rate hike later this year.
Sweden's Riksbank said that uncertainty abroad had increased and it
was difficult to assess how events in Greece might develop. It also
flagged the threat from a strong Swedish crown to inflation, as it
cut its key interest rate to -0.35 percent.
"For the market it's quite a big surprise because there was to a
certain extent the notion that the Riksbank may have reached the
lower bound in rates," said Manuel Oliveri, FX strategist at Credit
Agricole in London.
"They're obviously very strongly focused on bringing inflation to
target, and this is a message to the market that ... they will very
much remain focused on keeping any upside to the Swedish crown very
limited in order to not risk inflation falling further."
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A large majority of analysts in a Reuters poll had forecast the bank
would keep its already ultra-loose policy unchanged after the latest
inflation figures gave it some breathing room in its fight to fend
off the threat of deflation.
The crown hit a three-week low against the euro following the
Riksbank's announcement, falling 1 percent to 9.3700 crowns <EURSEK=D3>
before recovering a touch to 9.3462, still down 0.9 percent on the
day.
With U.S. markets closed on Friday for the July 4 Independence Day
holiday, the closely watched payrolls will come a day earlier than
usual at 1230 GMT (8:30 a.m. EDT), along with durable goods at 1400
GMT (10:00 a.m. EDT) among other numbers.
"This payrolls release is going to be the most decisive release
we've had for some time -- we think the Fed is going to hike in
September," said Sam Lynton-Brown, a currency strategist at BNP
Paribas in London.
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"If we get the upside surprise that we're expecting -- we're
forecasting 250,000 -- then we think there could be a significant
adjustment in U.S. front end rates, and ... there's a lot of
potential for dollar upside."
The euro was 0.2 percent up against the dollar at $1.1071.
Greek Prime Minister Alexis Tsipras on Wednesday urged Greeks to
reject an international bailout deal, souring hopes of any
breakthrough as markets looked ahead to Sunday's referendum that
might decide Greece's future in the euro zone.
Lynton-Brown added that, with it clear that the referendum would go
ahead, and with euro zone finance ministers adamant that no further
discussions would be held until after the vote, the euro was
unlikely to move much on Greek news before Sunday.
The New Zealand dollar skidded below 67 U.S. cents for the first
time in five years as a slide in dairy prices narrowed the odds on
more rate cuts. It traded down 0.9 percent at $0.6670.
(editing by John Stonestreet)
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